Essay on 2008 Us Economic Recession

The Global Financial Crisis of 2008 is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It resulted in the threat of total collapse of large financial institutions, the bailout of small and big banks by national governments, and downturns in stock markets around the world. In United States, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer confidence, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European…show more content…

Increased debt burden or over-leveraging

U.S. households and financial institutions became increasingly indebted or overleveraged during the years preceding the crisis. This increased their vulnerability to the collapse of the housing bubble and worsened the ensuing economic downturn. USA household debt as a percentage of annual disposable personal income was 127% at the end of 2007, versus 77% in 1990.

From 2004 to 2007, the top five U.S. investment banks each significantly increased their financial leverage (see diagram), which increased their vulnerability to a financial shock.

Commodities boom

Rapid increases in a number of commodity prices followed the collapse in the housing bubble. The price of oil nearly tripled from $50 to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008. An increase in oil prices tends to divert a larger share of consumer spending into gasoline, which creates downward pressure on economic growth in oil importing countries, as wealth flows to oil-producing states.

Copper prices increased at the same time as the oil prices. Copper traded at about

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The economic crisis that began in 2008 has been an issue that has been spoken about repeatedly during the presidential campaign. The presidential candidates practically begged for votes, promising a shortened unemployment line and an increase in spending. There have been plenty of United States citizens who have felt the anguish of the recession, lost their jobs, and longed for answers to end the days of penny pinching. Nearly everyone has been affected by this recession. Business owners have seen…

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global financial crisis of 2008 is a situation that any individual will be familiar with, an event that shook the world and still having profound effects upon international economies worldwide. The causes of the financial crisis are subject to much debate amongst differing schools of economic thought. The most convincing arguments explain how financial deregulation, the US housing bubble and the use of financial innovation brought about the most comprehensive world recession since the great depression…

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An Analysis of the Financial Crisis of 2008
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Centenary College
Analysis of the Financial Crisis of 2008
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